The UK’s payday loan industry continues to see a huge transformation following the introduction of FCA regulation in January 2015.
At one point, the payday loan industry was flying, with brands advertising on every radio and TV channel under the sun and sponsoring major sports teams across the UK. Yet the once £2 billion sector has seen major changes to address its reputation of ‘loan sharking’ and ‘irresponsible lending’. A huge overhaul of its regulatory framework and advertising driven by politicians and religious figures has seen the market shrink and top lender Wonga.com to record losses of £80 million in 2015.
New regulation from the Financial Conduct Authority
The FCA began regulating the payday loan industry in April 2014, taking over from The Office of Fair Trading. Following 29,000-payday loan related complaints recorded by The Citizens Advice Bureau in 2014, a tough approach was taken.
The regulator reviewed the practices of the some of the biggest lenders, which inevitably led to £220 million fine for Wonga, £15.4 million for Dollar Financial (The Money Shop, PaydayExpress and PaydayUK) and £1.7 million for Quickquid. The fines were partially paid to the regulator and some amounts were required to refund customers that should not have received loans in the first place due to their limited criteria.
To address the high rates of interest,